Investors in computer memory supplier Micron Technology (NASDAQ:MU) might be tempted by a wee dram of the hard stuff after the stock was downgraded.
Broker Robert W. Baird downgraded the stock to 'neutral' from 'outperform', sending the shares almost 5% lower in the morning trading session.
Shares currently trade at US$15.10, which happens to be 10 cents above the new price target set by analyst Tristan Gerra; previously Gerra had set his sights on a US$36 price target for the semiconductor company, but a lot has changed in the PC world since then, not least the advent of Windows 10.
The analyst is concerned the pricing structure of Microsoft's latest iteration of its operating system, which he thinks could lead to sharp falls in the price of dynamic random access memory, or DRAM.
"We believe blended DRAM pricing could fall by 20+% between now and early next year, down to fully loaded costs before capacity cuts take place," Gerra said.
He expects Micron's gross margin and earnings per share will hit its nadir in the quarter to end-February, and he sees little prospect of upside ahead of then.
Earlier this week Wedbush Securities also downgraded the stock, on over-supply concerns.
According to investment analyst Betsy Van Hees, industry checks suggest cost cuts won't outpace declines in average selling prices until mid-2016.
She slashed her price target to US$19 from US$26.